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House Price Dynamics: Evidence from Beijing |
| Jinhai Yan 1, Lei Feng 2, Helen X. H. Bao3, |
| 1.School of Public Affairs,
Xiamen University, Xiamen 361005, China; 2.Department of Land and
Real Estate Management, School of Public Administration, Renmin University
of China, Beijing 100872, China; 3.Department of Land Economy,
University of Cambridge, Cambridge CB39EP, UK; |
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Abstract To study the house price dynamics in China, this paper extends the traditional life-cycle model by incorporating land supply, regime shifts and government regulation factors. The models are estimated with an error correction framework using quarterly data from 2000 to 2007 in Beijing. The conclusions are as follows. (1) There exits a stable co-integration relationship between house price and fundamentals; land supply and financial regimes are also important determinants of long-run equilibrium house prices. (2) Short-run dynamics depend on changes of fundamentals and the adjustment process of housing market. Land supply has a significant impact on house price fluctuations while demand factors such as user costs, income and residential mortgage loan have greater influences. The adjustment speed of real house prices to the long-run equilibrium has been reduced significantly since 2005 which means exogenous shocks can cause prolonged deviation of real house prices from the equilibrium level.
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| Keywords
house prices
house price dynamics
regime shifts
macro-regulation
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Issue Date: 05 March 2010
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